PIP reforms come with many unanswered questions

On behalf of Thomas J. Ueberschaer, P.A. on Monday, June 25, 2012.

Personal injury protection -- the auto insurance that every Florida driver is required to buy -- is about to undergo a major overhaul that state officials hope will translate into lower premiums for millions of motorists.

But for now at least, even the official in charge of making sure the reforms actually work -- Chief Financial Officer Jeff Atwater -- says drivers will have to wait before they see significant savings.

"We will know the answer to that in the next 12 to 24 months," he said.

For months, the Legislature argued over how to fix the system that pays for the first $10,000 in medical bills in an auto accident regardless of who is at fault. Lawmakers ultimately struck a deal to put stricter limits on medical treatments that injured motorists can receive and create a new group intended to fight the fraud that insurers say is endemic in PIP.

As of July 1, state law will ban the use of PIP dollars to pay for massage or acupuncture treatments and will limit the payout for nonemergency treatment of accident-related injuries to $2,500. And Atwater will become head of a fraud-fighting group that's a bit unusual.

Rather than being funded by the state, the group must raise its own dollars - likely from insurers and/or the medical community - to be distributed to law-enforcement agencies to help them fight insurance fraud.

At this point, no one - including Atwater - knows exactly how that group will work. Aside from the fact that the CFO, attorney general and other state officials will make appointments to it from the insurance and medical industries, details still aren't clear. And what might happen if, say, a state attorney getting money from the fund wants to investigate an insurer or a physician who's a contributor is a lingering question.

Atwater said fundraising details are still being worked out, though he doesn't expect a multimillion-dollar budget. And he said he wants the group to focus more on looking at how to fund and share technology or data that may help economic-crimes units, rather than having insurance companies fund prosecutors.

"That's a bit of a pressure issue," he said. "You don't buy justice."

Atwater also added that any questions about the "integrity of the process" should be "pretty noticeable pretty quickly."

Already, insurers are saying that an Oct. 1 deadline for a 10 percent premium reduction will pass with an explanation from companies as to why that's not possible. The next deadline will be Jan. 1, 2014, when insurers must cut their rates by 25 percent - or explain to the state why not. That part of the bill was insisted on by Atwater, sponsor Sen. Joe Negron, R-Stuart, and incoming Senate President Don Gaetz, R-Niceville.

"We're certainly going to monitor it very carefully over the next couple of years," Negron said. "I want to watch and make sure insurance premiums go down."

Insurance companies are watching too, admittedly with some skepticism.

"It will be curious to see what [Atwater's] expectations are," said Michael Carlson, executive director of the Personal Insurance Federation of Florida, an industry lobbying group. "If there is going to be significant rate changes, we'll have to let 2013 unfold."

PIP costs have been skyrocketing, which the industry attributes to a rise in staged accidents, especially in South and Central Florida. Since 2009, according to the Office of Insurance Regulation, State Farm's PIP rates have gone up 94.6 percent, Geico's by 87.6 percent and Progressive's by 50.2 percent.

Translated into dollars, for a 40-year-old woman living in West Palm Beach, that meant $700 a year in 2012 for a large national insurance carrier, which had been expected to rise to almost $900 in 2013 without changes to the law. In Orlando, that same driver paid about $400 this year, with an expectation that it would go to about $550 in 2013.

One reason insurers are still skeptical about the law's effect on rates is that several unanswered questions remain - one of them being what effect, if any, Atwater's fraud-fighting group will have.

Another is how "emergency medical conditions" will be defined. Under the new law, accident victims must see a physician, which could include a chiropractor, within 14 days. If they require "emergency" treatment, a doctor can bill up to $10,000. If not, doctors can only bill up to $2,500. Insurers have already seen solicitations from doctors who promise - for a fee - to vouch that a patient has an "emergency medical condition" so a physician could collect a full $10,000 for the patient.

"How quickly are they going to beat the pants off that $2,500 limit?" Carlson wondered.

On the flip side, consumer advocates worry that patients won't be able to get the care they need if they sustain an injury such as a whiplashed neck or herniated disc that is painful but may not qualify as an emergency.

Atwater acknowledged that is possible that the Legislature may need to "tweak" that definition. His office has also contracted to pay $150,000 to an actuarial analysis company, Pinnacle Actuarial Resources, to analyze the measure and see whether the expected savings are realistic.

"I really believe that the expectation that a 10 percent reduction and to follow with a 25 percent reduction is achievable," Atwater said. "And even if it falls slightly short of those benchmarks, the people of Florida deserve that relief."

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